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Cablegate: Afghanistan's Heavily Indebted Poor Countries (Hipc)

VZCZCXRO1417
PP RUEHDBU RUEHPW RUEHSL
DE RUEHBUL #3972 3431409
ZNR UUUUU ZZH
P 091409Z DEC 09
FM AMEMBASSY KABUL
TO RUEHC/SECSTATE WASHDC PRIORITY 3889
RUEATRS/DEPT OF TREASURY WASHINGTON DC PRIORITY 0951
INFO RUCNAFG/AFGHANISTAN COLLECTIVE

UNCLAS KABUL 003972

SENSITIVE
SIPDIS

DEPT FOR S/SRAP AND SCA/A
TREASURY FOR LMCDONALD,MNUGENT,JCASAL, AKIFAYAT

E.O. 12958: N/A
TAGS: EFIN EAID PGOV PREL AF
SUBJECT: Afghanistan's Heavily Indebted Poor Countries (HIPC)
Completion Point: Awaiting Mining Sector Reforms

1. (SBU) Summary: On December 7, Coordinating Director for
Development and Economic Affairs, E. Anthony Wayne raised U.S.
concerns with Afghan Finance Minister Zakhilwal that the Government
of the Islamic Republic of Afghanistan (GIRoA) may not satisfy the
mining trigger needed to reach its HIPC completion point by the next
IMF Board Review (scheduled for January 13). The mining trigger
requires that GIROA enact and implement improved mining and
hydrocarbon regulations and establish a cadastre of mining
contracts. GIRoA has completed all of the required actions except
finalizing and signing the regulations into law. Zakhilwal told
Ambassador Wayne that he hoped to bring the mining regulations up
for cabinet approval next Monday, December 14, following a World
Bank review. The Mission is currently following up with World Bank
staff on the feasibility of reviewing the voluminous mining
regulations within such a short period of time and, if not feasible,
options available to ensure an adequate review by international
parties. Minister Zakhilwal also requested that the USG provide him
with any information pertaining to recent allegations against the
Minister of Mines so Afghans could take forward this investigation
of charges. End summary.

OUTSTANDING MINING TRIGGER STANDS IN WAY OF DEBT RELIEF
- - - - - - - - - - - - - - - - - - - - - - - - - - - -

2. (SBU) Ambassador Wayne indicated the U.S. had concerns about the
issuance of a waiver on the mining trigger, which has been
recommended by the World Bank and IMF, in light of recent
allegations in the U.S. press that the Minister of Mines received a
payment of $30 million during the bidding process for the Aynak
Copper Mine. (NOTE: Reaching the HIPC completion point would provide
GIRoA with approximately $1 billion in debt relief. GIRoA has made
substantial progress on all of the triggers but failure to satisfy
the mining trigger may prevent GIRoA from reaching HIPC completion.
The Mining Trigger requires that GIRoA implement more stringent
mineral and hydrocarbon regulations. While the Parliament has
passed the requisite legislation, the Cabinet has not signed the
regulations into law.)

3. (SBU) Minister Zakhilwal stated his intention to have the World
Bank evaluate the mining regulations this week, following which, he
would send them to the Cabinet for review next Monday, December 14.
He said his hope is that the Cabinet will pass the regulations by
the end of next week. Minister Zakhilwal also expressed confidence
that President Karzai would appoint a new, cleaner, and more
competent Minister of Mines. Zakhilwal said he had suggested two
candidates and Karzai said to him he would go with one of them.
(NOTE: The Mission has scheduled a meeting with the World Bank's
Mining Team for December 9 to discuss whether Minister Zakhilwal's
proposed timetable provides enough time for the Bank to review the
regulations. End note.)

4. (SBU) Minister Zakhilwal tried to allay USG concerns by citing
GIRoA progress to date on mining reforms. Pursuant to the mining
trigger, GIRoA has created a cadastre for mining contracts
(essentially an information clearing house), enacted the Extractive
Industries Transparency Initiative, and passed legislation on
hydrocarbon and mineral regulations. The only remaining action is
for the Afghan Cabinet to approve the mining regulations. This step
has been delayed due to the reluctance of the current Minister of
Mines to act affirmatively.

5. (SBU) Minister Zakhilwal requested that the USG share any
available information pertaining to press claims of corruption and
bribery made against the Minister of Mines with the Ministry of
Finance so the GIRoA can take its ongoing investigations of the
allegations forward. (Separately the Attorney General told the
Justice attach that his prosecutors needed more
information/evidence to pursue their investigations. Zakhilwal said
his office is currently reviewing approximately 100 of the existing
177 mining contracts for irregularities. He has requested the
others. Ambassador Wayne promised to follow up on the Minister's.
(Note: In a subsequent meeting, a World Bank staffer stated his
belief that the Aynak Copper Mine bidding and contracting processes
followed the legal procedures and "appeared to be a good deal."
This did not however preclude the possibility of side payments to
the Minister of Mines, he said. End note.)

6. (SBU) Comment: We are following up with World Bank staff and
their visiting Mining Team on December 9 to ascertain when they will
complete their review of the mining regulations, which is reportedly
a 1500-page Dari language document. We will report this discussion
by septel. End Comment.

RICCIARDONE

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